The Tanaiste, Ms Harney and the Minister for Finance, Mr McCreevy, are now likely to discuss the contents of a controversial report recommending a new independent financial regulator, before bringing the issue to Cabinet. The report was received by Ms Harney and Mr McCreevy yesterday.

The report from the Government-appointed advisory committee, chaired by Mr Michael McDowell SC, favours a new institution separate from the Central Bank and funded by the financial services sector.

However, officials from the Department of Finance and the Central Bank are understood to have included in the report their strong objections to the idea. Mr McCreevy and Ms Harney will now have to decide how much of the report should be adopted. Ms Harney's Department - Enterprise, Trade and Employment - is strongly in favour of an independent agency, but Mr McCreevy will have to go against the advice of his senior officials if he accepts its main recommendation. The Central Bank is expected to lobby Ministers strongly to reject the idea of an independent agency. It claims all available expertise in the area is retained within the Central Bank and consequently the Bank is in the best position to take charge of the new institution.

However, officials from Ms Harney's department, along with the Director of Consumer Affairs, Ms Carmel Foley, have argued that the Central Bank is more suited to concentrating on "prudential supervision" and a new agency is required to monitor consumer issues. Deep divisions have emerged among members of the committee in recent months. While it first came down in favour of the Central Bank retaining a role, the committee decided eventually to recommend the opposite.

Sources said the objections from the Central Bank and the Department of Finance were extensive.

The union representing staff at the Central Bank, MSF, emphatically rejected the idea of a body independent of the Bank. It said during the week an independent body would be compromised because it would be too dependent for its funding on the financial services industry. However, the Association of Higher Civil Servants has supported the idea of a "greenfield" operation.

Yesterday, the Irish Brokers' Association (IBA) joined the debate and expressed concern that Central Bank staff might not join any new body.

The chief executive of the IBA, Mr Paul Carty, said: "I am calling on the Minister for Finance, Mr McCreevy to reassure the Central Bank staff via its governor that they will have roles to play in the new regulatory body." He added that the Government should "quickly publish the report rather than allowing the uncertainty to build further".

He was responding to a claim from MSF that some staff from the Central Bank may leave to take up higher paying positions in the private sector.

"Given the excellence of the Central Bank staff, it would be a disaster if there was an exodus to the private sector because of a failure to communicate that they have a role to play," he said. "There would be a huge financial cost to the State if they were lost to the new body, as well as a major loss of expertise."